What’s Affecting Oil Prices This Week? (June 27, 2022)

The price of Brent crude ended the week at $109.10 after closing the previous week at $113.12. The price of WTI ended the week at $107.62 after closing the previous week at $109.16.

In last week’s note, we highlighted that while prices have been declining, the price movement remained on the upward trend that started in December of last year. We also stated that if the trend breaks, we are expecting to see the price of Brent crude oil dropping towards $100. At the end of last week, the price of Brent crude did break below the upward trend line, but not decisively. As such, we are still waiting for confirmation.

There are signs that the global economy is slowing down, including the economies of Europe and the U.S. The Federal Reserve Bank of Atlanta is indicating that the U.S. economy is growing at zero percent in second quarter of this year—after contracting by 1.5% in the first quarter. The economic slowdown and the high price for oil and oil products are softening demand. In addition to the tepid oil demand, we have been putting forth the view that the supply situation will be stabilizing, in part, because the announced EU ban on imports of Russia oil, will be the last major announcement which will negatively affect sentiment pertaining to future oil supply. Now, there is noise coming out of the ongoing G7 meeting with members considering the possibility of placing price caps on Russian oil and pipeline gas.